China's stock markets are still in their infancy, having only been established in early 1990s. However, figures illustrate the relative immaturity of the Chinese market but also serve to further underline the market's tremendous potential.

China's stock markets are still in their infancy, having only been established in the early 1990s. Foreign investment in the market is even less developed, with only 17 foreign institutions permitted to participate in China's A-share market via the Qualified Foreign Institutional Investor (QFII) scheme as the summer 2004.

Foreign financial analysts have cited various reasons for taking a cautious approach to investing in the China market, but the issues evaluated in this introduction might be more accurately described as growing pains. Such issues will not be solved overnight, but each time one is overcome, new growth potential for the market is unlocked.

Regardless of what obstacles may lie ahead, China's stock markets are on the way to becoming among the world's most important capital markets. Major financial institutions worldwide are trying to find their piece of the action and individual investors all over the world are looking for ways to profit from the China phenomenon by whatever means are available, direct or indirect.

In just over a decade, the China A-share market has grown to become Asia's second largest stock market by turnover and the third largest by market capitalization, with the Shanghai and Shenzhen markets combining for a market capitalization of more than US$500 billion.

This introduction aims to provide readers with an overview of China's stock market. It will also highlight some of the market's more pressing issues and their ramifications on its short- and medium- term growth and development.